Demand for corn and soybeans remains robust and projected supply is stable, which is expected to support prices moving forward.

USDA dropped its corn production estimate slightly to 10.706 billion bushels from September’s 10.727 billion bushels. USDA also lowered its U.S. average yield forecast somewhat, from September’s 122.8 bushels per acre to 122 bushels for October.

Estimated corn ending stocks fell 114 million bushels to 619 million. "Corn ending stocks levels are historically tight, virtually pipeline," says Greg Wagner, president of GWX Ag Advisors, Chicago. Wagner was an analyst on the October 10 pre-report press briefing held by the CME Group, Chicago. USDA’s October 2012-13 corn ending stocks forecast was well within trade estimates, which ranged from 454 million to 815 million bushels.

Despite lower production and ending stocks, USDA still dropped its U.S. season average farm price for corn by 10 cents to $7.80 per bushel.

USDA left feed use for corn unchanged at 5.85 billion bushels and decreased projected corn exports only slightly, from 1.25 billion bushels in September to 1.15 billion bushels in today’s report. "Demand will help support the corn market," says Randy Martinson, manager of Progressive Ag Marketing, Fargo, N.D., and a commentator on an MGEX press briefing following the report.

"The 2012 growing season is not without precedence, but it certainly is one for the ages," says Wagner. In its May 10 WASDE report, Wagner points out that USDA’s estimated U.S. average corn yield was 166 bushels per acre, and the December corn futures contract was trading below $5 per bushel. Since then, the December contract has soared to a high close near $8.40 per bushel and subsequently retraced to the mid-$7 range.

Soybean Yields Increasing

USDA’s forecast for soybean production is now 2.86 billion bushels, up 9% from September’s estimate, but 8% lower than last year’s output. The department increased its U.S. average soybean yield estimate by 2.5 bushels per acre to 37.8 bushels, which is 4.1 bushels lower than last year. USDA should have a pretty good handle on the soybean yield with 58% of the crop already harvested as of Oct. 7, according to USDA’s Crop Progress report released Monday.

"We were predicting disaster three months ago, but we had pretty good moisture in August," says Jerrod Kitt, with the Linn Group, Chicago, and a commentator on the CME Group’s press briefing. "Our final estimate for the soybean yield is 38 bushels per acre," Kitt adds.

According to USDA’s Crop Production report, also released today, yield forecasts for soybeans were higher or unchanged in all of the top soybean states. USDA also increased its harvested acreage estimate for soybeans to 75.7 million acres, a 1% increase from September’s forecast.

Ending stocks for soybeans are now estimated at 130 million bushels, up 15 million bushels from September’s estimate. The 2012-13 ending stocks estimates ranged between 95 million and 203 million bushels.

Demand for soybeans is also expected to remain tight into the new crop year, according to the WASDE report. "USDA increased crush by 40 million bushels and exports by 210 million bushels with most of it going to China," says Martinson.

Despite strong demand for beans, the supply uptick was enough to cause USDA to sharply lower its projected season average price for soybeans from $16 per bushel in its September report to $15.25 in today’s report.

USDA left soybean production estimates for Brazil and Argentina basically unchanged, with Brazil’s output at 81 million metric tons and Argentina’s at 55 million metric tons. "The South American crop is getting in in good condition with rain," says Martinson. Together Brazil and Argentina represent more than half (53%) of world soybean production, and the 2012-13 soybean crop in Brazil is forecast to be 4% larger than the U.S. crop.